20 dividend stocks that may be safest if the Federal Reserve causes a recession

Investors cheered when a report last week showed the economy expanded in the third quarter after back-to-back contractions.

But it’s too early to get excited, because the Federal Reserve hasn’t given any sign yet that it is about to stop raising interest rates at the fastest pace in decades.

Below is a list of dividend stocks that have had low price volatility over the past 12 months, culled from three large exchange traded funds that screen for high yields and quality in different ways.

In a year when the S&P 500 SPX, -0.41% is down 18%, the three ETFs have widely outperformed, with the best of the group falling only 1%.

Read: GDP looked great for the U.S. economy, but it really wasn’t

That said, last week was a very good one for U.S. stocks, with the S&P 500 returning 4% and the Dow Jones Industrial Average DJIA, -0.24% having its best October ever.

This week, investors’ eyes turn back to the Federal Reserve. Following a two-day policy meeting, the Federal Open Market Committee is expected to make its fourth consecutive increase of 0.75% to the federal funds rate on Wednesday.

The inverted yield curve, with yields on two-year U.S. Treasury notes TMUBMUSD02Y, 4.557% exceeding yields on 10-year notes TMUBMUSD10Y, 4.046%, indicates investors in the bond market expect a recession. Meanwhile, this has been a difficult earnings season for many companies and analysts have reacted by lowering their earnings estimates.

The weighted rolling consensus 12-month earning estimate for the S&P 500, based on estimates of analysts polled by FactSet, has declined 2% over the past month to $230.60. In a healthy economy, investors expect this number to rise every quarter, at least slightly.

Low-volatility stocks are working in 2022

Take a look at this chart, showing year-to-date total returns for the three ETFs against the S&P 500 through October:


The three dividend-stock ETFs take different approaches:

  • The $40.6 billion Schwab U.S. Dividend Equity ETF SCHD, +0.26% tracks the Dow Jones U.S. Dividend 100 Indexed quarterly. This approach incorporates 10-year screens for cash flow, debt, return on equity and dividend growth for quality and safety. It excludes real estate investment trusts (REITs). The ETF’s 30-day SEC yield was 3.79% as of Sept. 30.
  • The iShares Select Dividend ETF DVY, +0.41% has $21.7 billion in assets. It tracks the Dow Jones U.S. Select Dividend Index, which is weighted by dividend yield and “skews toward smaller firms paying consistent dividends,” according to FactSet. It holds about 100 stocks, includes REITs and looks back five years for dividend growth and payout ratios. The ETF’s 30-day yield was 4.07% as of Sept. 30.
  • The SPDR Portfolio S&P 500 High Dividend ETF SPYD, +0.56% has $7.8 billion in assets and holds 80 stocks, taking an equal-weighted approach to investing in the top-yielding stocks among the S&P 500. It’s 30-day yield was 4.07% as of Sept. 30.

All three ETFs have fared well this year relative to the S&P 500. The funds’ beta — a measure of price volatility against that of the S&P 500 (in this case) — have ranged this year from 0.75 to 0.76, according to FactSet. A beta of 1 would indicate volatility matching that of the index, while a beta above 1 would indicate higher volatility.

Now look at this five-year total return chart showing the three ETFs against the S&P 500 over the past five years:


The Schwab U.S. Dividend Equity ETF ranks highest for five-year total return with dividends reinvested — it is the only one of the three to beat the index for this period.

Screening for the least volatile dividend stocks

Together, the three ETFs hold 194 stocks. Here are the 20 with the lowest 12-month beta. The list is sorted by beta, ascending, and dividend yields range from 2.45% to 8.13%:

Company Ticker 12-month beta Dividend yield 2022 total return
Newmont Corp. NEM, -1.44% 0.17 5.20% -30%
Verizon Communications Inc. VZ, 0.22 6.98% -24%
General Mills Inc. GIS, -1.58% 0.27 2.65% 25%
Kellogg Co. K, -1.08% 0.27 3.07% 22%
Merck & Co. Inc. MRK, -1.42% 0.29 2.73% 35%
Kraft Heinz Co. KHC, -0.65% 0.35 4.16% 11%
City Holding Co. CHCO, -1.94% 0.38 2.58% 27%
CVB Financial Corp. CVBF, -1.81% 0.38 2.79% 37%
First Horizon Corp. FHN, -0.41% 0.39 2.45% 53%
Avista Corp. AVA, -8.21% 0.41 4.29% 0%
NorthWestern Corp. NWE, +0.04% 0.42 4.77% -4%
Altria Group Inc MO, -0.28% 0.43 8.13% 4%
Northwest Bancshares Inc. NWBI, +0.13% 0.45 5.31% 11%
AT&T Inc. T, +0.66% 0.47 6.09% 5%
Flowers Foods Inc. FLO, -0.49% 0.48 3.07% 7%
Mercury General Corp. MCY, -0.10% 0.48 4.38% -43%
Conagra Brands Inc. CAG, -0.98% 0.48 3.60% 10%
Amgen Inc. AMGN, +0.63% 0.49 2.87% 23%
Safety Insurance Group Inc. SAFT, -2.10% 0.49 4.14% 5%
Tyson Foods Inc. Class A TSN, -0.51% 0.50 2.69% -20%
Source: FactSet

Any list of stocks will have its dogs, but 16 of these 20 have outperformed the S&P 500 so far in 2022, and 14 have had positive total returns.

You can click on the tickers for more about each company. Click here for Tomi Kilgore’s detailed guide to the wealth of information available free on the MarketWatch quote page.

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